Just thinking aloud, kinda "war-gaming" this... How many American companies will decide to become non-American companies as a result? Or more likely, how many will offset their increased business expenses (because a tax is an expense on the balance sheet) by lowering their labor expenses or raising prices?

Two truisms:
- Taxes don't stay where you put them.
- Other parties do not always act in the way you expect them to act.

In the first case, think higher prices, lower wages, lower employment, reduced GDP growth, or all of the above.* In the second, it's foolish to think that in a given interaction, the other party will just sit there and take what you dish out without attempting to counteract your moves.

* One study that looked at a pretty large sample--all the OECD member states over a 30 year period--showed an average 0.9% decrease in GDP growth for each 1% increase in the corporate tax rate. Others have shown a negative impact on employment. Granted, if the rate is a steady +3.0%, and a 1% tax increase knocks it down 0.9% to about +2.97, that's not going to kill the economy. But it will add up in the long run in terms of lost growth potential. Let's say it's a 10% increase. Now you're talking about +3 turning to +2.7. If it were to remain steady for a decade, then the economy would grow about 11% less over 10 years than it would have otherwise. Phrased in real numbers using current GDP, that would be a greater than half-trillion dollar hit to the GDP over 10 years.

I'm a conservative but I can't see the good in taxs havens. We can always argue that the tax rate is to high but even if it is that doesn't mean that some companies/people should shirk their responsibilities altogether while the rest of us pay the difference.
I'm glad something is finally being done about this.

Roger

We just need a flat tax system

The President was mistaken, and as he acknowledged, clearly in campaign mode when he equated the existence of 12,000 financial services businesses in the Cayman Islands to some sort of tax scam. Most large U.S. corporations are incorporated in the state of Delaware, but don’t have offices there either. The same is true in the Cayman Islands.

Most of the 18,000 financial services companies are engaged in structuring access for the benefit of United States financial institutions into the International Capital Markets. This has reduced the costs of home loans, consumer loans, credit card and auto loans for the benefit of American consumers.

There are 10,000 hedge funds in the Cayman Islands which act as investment pools for institutional investors wishing to invest in U.S. markets. These are not available for retail investment by U.S. individuals.

Also, U.S. corporations are taxed in the jurisdiction in which they operate – including their subsidiaries, regardless of where they are incorporated. Offshore financial centers like the Cayman Islands simply enable American companies to compete internationally and reinvest their profits.

Of course, treaties with the U.S. – like the Tax Information Exchange Agreement – ensure financial transparency and make certain tax evasion does not occur. These treaties provide a clear distinction between the Cayman Islands and non-transparent jurisdictions such as those listed as uncooperative tax havens by the Organisation for Economic Co-Operation and Development (OECD).